The Promise of Biofuels in Africa Status, Challenges and Opportunities Stephen Karekezi,

1. African Union/Brazil/UNIDO Bio-Fuels Seminar in Africa30th July – 1st August 2007Addis Ababa, Ethiopia The Promise of Biofuels in Africa Status, Challenges and Opportunities Stephen Karekezi, Waeni Kithyoma & Samwel Leyian AFREPREN/FWD Nairobi, Kenya

2. Outline • Quick background brief on energy sector • Overview of Biofuels in Africa • Key Drivers • Principal Stakeholders • Status & Prospects • Challenges • Options for addressing challenges

3. African Energy Sector – 3 distinct regions

4. TBTs IBTs MBTs Bio-energy in AfricaThree Categories • Traditional Biomass Energy Technologies (TBTs) • Inefficient use of wood, charcoal, leaves, agricultural residues, animal/human waste & urban waste • Improved Biomass Energy Technologies (IBTs) • Improved and efficient technologies for direct combustion of biomass such as improved cooking/heating stoves and improved biofuel kilns • Modern Biomass Energy Technologies (MBTs) –Conversion of biomass energy to advanced fuels/forms namely liquid fuels, gas and electricity

5. Bio-fuels in Africa – Key drivers • Energy security & diversification: Reduced dependence on imported fossil fuels and increasing energy security • Higher convertible currency revenue: Potential lucrative biofuel export market particularly to EU • New revenue stream for agro-industries & farmers: Can realize a new & substantial revenue stream to agro-industries & farmers especially if using by-products of existing crops + strengthen backward linkages to agriculture. • Carbon finance: Cleaner options that reduce fossil fuels use & reduce greenhouse gas emissions thus attract carbon concessional finance • Jobs: Energy crops for bio-fuels production can create job opportunities for rural communities in Africa arising from labor-intensive biofuels agriculture • Local rural energy needs: Can assist in providing modern energy services (motive power & lighting)

6. 1. Energy Security & Diversification

7. 1. Energy Security & Diversification • On average, oil-importing developing countries use more than twice as much oil to produce a unit of economic output as do OECD countries • In 26 African countries, oil imports account for 10-20% of merchandized imports (growing portion of oil imports used for power generation) • Global prices recently peaked again to $75 per barrel • According to African Development Bank, at such high prices, debt relief to 14 of 19 African HIPC oil-importing countries smaller than increase in oil import bill • 39 Net oil importers in Africa • 13 Net oil exporters (expected to increase by 2)

8. 1. Energy Security & Diversification Source: AfDB, 2006 - Computed using IEA data

9. 20 16 12 Mtoe 8 4 0 2000 2001 2002 2003 2004 2005 Brazil United States European Union China India Other 2. Higher Convertible Currency Exports Recent Trends in Ethanol Production 95% growth Ethanol production has almost doubled in 5 years, with the bulk of the increase coming form Brazil & the United States

10. 2. Higher Convertible Currency Exports 2.5 2.0 1.5 Mtoe 1.0 0.5 0 2000 2001 2002 2003 2004 2005 Germany France Italy Rest of Europe United States Other Recent Trends in Biodiesel Production 295% growth Biodiesel production has almost quadrupled since 2000, with European countries – notably Germany – contributing most of the growth

11. 2. Higher Convertible Currency Exports • Global biodiesel production projected to increase to more than 20 billion litres by 2020 mainly in EU • Over the next 15-20 years, biofuels could meet close to 25% of world energy needs • Key driver is the EU biofuels target

12. 3. Increased Revenue to Agro-Industries and Farmers • In Kenya, close to 20% of population directly or indirectly dependent on sugar industry • Mauritian sugar companies’ revenue from biofuel-based electricity sales national grid higher than sugar sales • Significant benefits from optimizing revenues from sugar, electricity sales and ethanol • In Mauritius, sugar farmers (even small scale farmers) share in revenue from sale of biofuel-based electricity sales to power utility

13. 4. Carbon Finance

14. 5. Jobs Job creation potential of bio-fuels compared to other conventional fuels Source: Earthlife Africa/SECCP report 2003

15. 6. Local Rural Energy NeedsAccess to electricity – bottom 40% (mainly rural) Source: Estache, 2005

16. Bio-fuels in Africa - Key Stakeholders • Energy security & diversification • Higher convertible currency exports • New revenue stream for agro-industries & farmers • Carbon finance • Jobs • Local rural energy needs Gov Development Banks Development Partners Sub-regional, Regional. & International Institutions Research Private sector Commercial Banks NGOs Civil Society

17. Biofuels in Africa Focus on • Biomass Cogeneration • Bio-ethanol • Biogas • Bio-diesel • Biomass Gasification

18. Biomass Cogeneration – Status and Trends • Cogeneration: Simultaneous production of electricity and process heat from a single dynamic plant. • Largely produced from sugarcane bagasse byproduct • A number of countries in the Africa region have successfully deployed cogeneration e.g. Mauritius, South Africa, Kenya,Swaziland, Malawi and Uganda. • Attractive potential for scale-up as most sugar factories already practice cogeneration using low pressure systems – require modest investment to generate excess power

19. Power Generation – Mauritius 2004 Others Sugar Industry Cogeneration in Mauritius Lessons for Africa • Successful in sale of power to the grid • Accounts for close to 40% of a 725MW national generation capacity (of which 25% bagasse) • Began with smaller installations (1.5MW - 5MW, now installing 70MW plants)

20. Cogeneration potential in the sugar industry in selected African countries

21. Biomass Cogeneration Key Challenges • Feed-in-tariff (or price paid to cogenerators by utilities) not pre-determined and often set too low • Negotiations of power purchase agreement (PPA) can be too lengthy (took over 10 years to negotiate cogeneration PPA in Uganda), • Two key policy measures: • Pre-defined Feed in tariff • Standard PPA

22. Cogen for Africa Initiative • UNEP/GEF (Global Environment Facility) and African Development Bank initiative. AFREPREN/FWD is Executing Agency • Objective is to promote cogeneration (biomass-based mainly) in eastern and southern Africa • Initial focus on biomass-based agro-industries – sugar sector

23. Cogen for Africa project • To build on success of Mauritius & relevant elements of EC-supported Cogen Asia initiative • Initial phase to cover 7 countries which have endorsed project (Kenya, Uganda, Tanzania, Sudan, Ethiopia, Malawi and Swaziland) – later phases could expand to other regions of Africa • Partnership with African Development Bank likely to address key financial challenges of cogen investments • Implementation begun in mid 2007. • Implementation phase – 6years

24. Cogen for Africa 40 MW additional installed capacity of cogeneration promotion projects 200+ MW additional cogeneration capacity 20 MW pipeline projects Beyond 6 years 6 year project period

25. Bio-ethanol – Status &Trends

26. Bio-ethanol – Status &Trends • One of the most developed bio-fuel option in the region • Ethanol production in Africa is mostly concentrated in Southern Africa • Linked mainly to the sugar industry – molasses • Other feedstock include maize, cassava and sweet sorghum

27. Bio-ethanol – Status &Trends • Proven technology - Medium to large scale projects implemented in: • Swaziland ; South Africa; Uganda; Zimbabwe; Kenya; Egypt; Malawi ; Nigeria. • Successful blending program in Malawi – has been in place for long. Also perceived as option for removing lead in transport fuel • Growing interest from sugar factories to expand bio-ethanol production to generate extra revenue stream – generates some of the highest internal rates of return for sugar factories

28. Ethanol Production in Selected African Countries 2005 Source: Renewable Fuels Association, Industry Statistics,http://www.ethanolrfa.org/industry/statistics/#E

29. Bio-ethanol – Key Challenges • Need predetermined price for bio-ethanol • Compulsory requirement for blending • Key policy measures • Set attractive price for bio-ethanol • Establish requirement for blending • Protection and ring-fence away influence of fossil oil companies

30. Biogas – Status and Trends SourceThe Republic of Uganda,2007

31. Biogas – Status and Trends • Fairly well developed in the region • Proven technology - A number of nation-wide biogas projects implemented in a number of countries • Significant potential in the region • Encouraging biogas initiatives in Ghana, North Africa (landfill) and South Africa (landfill) • Success appears to be most encouraging in institutional sector

32. SourceThe Republic of Uganda,2007 Biogas – estimated no. of installed units in selected African countries Source: AFREPREN/FWD

33. Potential of Biogas digesters in Africa - 2007 Source: Winrock, 2007

34. SourceThe Republic of Uganda,2007 Biogas - Challenges • Substantial water requirements of biogas under-estimated • High-up front costs that require credit system – principal reason for better performance at institutional level • For small scale systems, important to limit scope of initial dissemination efforts to minimize maintenance cost

35. Bio-diesel - Status and Trends

36. Bio-diesel - Status and Trends • Bio-diesel term here inclusive of Pure Plant Oil (PPO) • Embryonic technology in the region but with significant potential • Main interest in use of Jatropha as feedstock • Pilot projects implemented in large number of African countries with Mali and Ghana recording some encouraging results

37. Bio-diesel - Challenges • Well proven at small scale but jury still out on large scale trials being initiated in various countries • At large scale, requires significant applied R&D to establishment of new agricultural system • High costs associated with technology transfer & adaptation • Possible competition for land between biodiesel feedstock and food crops but can grow in relatively arid areas where access to land is probably less contentious • Local financiers still uncertain due to unfamiliarity with this option

38. Biomass Gasification • Least developed option in the region • Experimental and pilot projects implemented in some countries in the region but more encouraging results in other developing countries such as India • Pilot initiatives underway in North Africa and Southern Africa • Appears to be promising in medium to long-term

39. Gasification - Barriers • Limited technical expertise on biomass gasification in the region • High risk perception from potential project implementers and financiers due to unfamiliarity with option • Need to increase awareness, enhance skills and initiate additional pilot test plants

40. Gasification - Barriers • Limited technical expertise on biomass gasification in the region • High risk perception from potential project implementers and financiers due to unfamiliarity with option • Need to increase awareness, enhance skills and initiate additional pilot test plants

41. Key Sustainability Issues • Equity: Will the poor benefit? • Mauritius revenue sharing mechanism • Case of West Kenya sugar factory where cane farmers get 51% of ex-factory sugar price • Meet energy needs of the poor? • Primarily through increased incomes subject to existence of adequate revenue sharing mechanism • Modern biofuels cleaner with lower indoor emissions but cost still an issue • Is there sufficient land? • Most land requirement projections for meeting internal biofuel demand in the near term appear to be manageable • Less certain if one takes account of biofuel export markets – need additional assessments

42. Key Sustainability Issues • Adversely affect food security? • Experience in sugar growing areas indicate increased food security as a result of increased incomes – subject to regular payments for sugar cane delivery and adequate revenue sharing mechanism • Biodiversity and natural resource management • Biofuels development tends to lead to mono-crop culture and intensive use of fertilzier and pesticides • Needs additional detailed assessments • Key role for agencies such as UNIDO and/or UNEP/AU/ECA and sub-regional agencies to take lead on the sustainability issue

43. Priority OptionsWill Vary According to Country’s Specific Characteristics • Drylands (Arid and Semi Arid Areas) • Short Term Options • Biodiesel • Bioethanol • Cogeneration • Medium to Long Term options • Biogas • Biomass Gasification

44. Priority OptionsWill Vary According to Country’s Specific Characteristics • Wetlands (Moist and rainland areas) • Short Term Options • Bioethanol • Cogeneration • Medium to Long Term options • Biodiesel • Biogas • Biomass Gasification

45. Way Forward • Short Term • Focus on proven options that build on existing agro-industries that use available agro-wastes (such as bioethanol in existing sugar industries) to minimize start-up costs and reduce risk • Undertake regularly updated detailed resource assessments

46. Way Forward • Short Term • Set pre-determined prices for bioenergy options • Establish supportive regulatory and policy measures such as standard PPAs and blending requirements • Concentrate on investment analysis and preparation of “bankable” investment proposals • Encourage national, regional and international exchange of experience, skills and technologies (regional bioenergy network)

47. Way Forward • Medium to Long Term • Finance resource assessments • Support R&D and local adaptation • Initiate pilot and demonstration investments • Strengthen national, regional and global technical exchange of skills, experience and information

48. Thanks for your attention www.afrepren.org & www.unido.org